Swap Ratio
The number of acquirer shares issued for each share of the target in a share-based merger.
Formula
Swap Ratio = Value per Target Share / Value per Acquirer Share, as determined by the valuers
Unit
ratio (x, times)
In depth
The swap ratio is the price of the deal expressed in shares, and it determines exactly how the combined value is divided between the two shareholder groups. Because it is fixed while both share prices continue to move, the effective price paid changes between announcement and completion — a fall in the acquirer's price reduces what the target's holders receive. This is why merger arbitrage involves buying the target and shorting the acquirer in the ratio's proportion. The valuation reports supporting the ratio are filed with the scheme and are the most informative document on whether the terms are fair.
Worked example
A 3:5 ratio with the acquirer at ₹500 values each target share at 3 x 500 / 5 = ₹300. If the acquirer falls to ₹440, the same ratio now values the target share at ₹264 — a 12% reduction with no renegotiation.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Swap Ratio” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.